Nokia 2011 Annual Report Download - page 169

The Equity Program 2012 consists of performance shares, stock options and restricted shares. The
primary equity instruments for the executive employees are performance shares and stock options.
Restricted shares are also used for executives in lesser amounts for retention purposes. For directors
below the executive level the primary equity instruments are performance shares and restricted shares.
Below the director level, performance shares and restricted shares are used on a selective basis to
ensure retention and recruitment of functional mastery and other employees deemed critical to Nokia’s
future success. These equity-based incentive awards are generally forfeited if the employee leaves
Nokia prior to vesting.
Performance Shares
The Performance Share Plan 2012 approved by the Board of Directors has a performance period of
two years (2012-2013) and a subsequent one-year restriction period. Therefore, the amount of shares
based on the financial performance during 2012-2013 will vest after 2014. No performance shares will
vest unless Nokia’s performance reaches at least one of the threshold levels measured by two
independent, pre-defined performance criteria:
(1) Average Annual Net Sales (non-IFRS): EUR 17,394 million (threshold) and EUR 26,092 million
(maximum) during the performance period 2012-2013, and
(2) Average Annual EPS (diluted, non-IFRS): EUR 0.04 (threshold) and EUR 0.35 (maximum) during
the performance period 2012-2013.
Average Annual Net Sales is calculated as an average of the non-IFRS net sales for Nokia Group
(excluding Nokia Siemens Networks B.V. and its subsidiaries) for the years 2012 and 2013. Average
Annual EPS is calculated as an average of the diluted, non-IFRS earnings per share for the years 2012
and 2013 for Nokia Group. Both the Average Annual Net Sales and the Average Annual EPS criteria
are equally weighted and performance under each of the two performance criteria is calculated
independent of each other.
We believe the performance criteria set above are challenging. The awards at the threshold are
significantly reduced from grant level and achievement of maximum award would serve as an
indication that Nokia’s performance significantly exceeded current market expectations of our long-
term execution.
Achievement of the maximum performance for both criteria would result in the vesting of a maximum of
36 million Nokia shares. Performance exceeding the maximum criteria does not increase the number
of performance shares that will vest. Achievement of the threshold performance for both criteria will
result in the vesting of approximately 9 million shares. If only one of the threshold levels of
performance is achieved, only approximately 4.5 million of the performance shares will vest. If none of
the threshold levels is achieved, then none of the performance shares will vest. If the required
performance level is achieved, the vesting will occur after 2014. Until the Nokia shares are delivered,
the participants will not have any shareholder rights, such as voting or dividend rights associated with
these performance shares.
Stock Options
The stock options to be granted in 2012 are out of the Stock Option Plan 2011 approved by the Annual
General Meeting in 2011. For more information about the Stock Option Plan 2011 see “Equity-Based
Incentive Programs – Stock Options” above.
Restricted Shares
Restricted shares under the Restricted Share Plan 2012 approved by the Board of Directors are used
as described above to ensure retention and recruitment of functional mastery and other employees
167